ACC567 Financial Accounting 2

Question 2 – Accounting for associates

On 1 July 2015, Richmond Ltd acquired 40% of the share capital of Carlton Ltd, for $160,000. The equity of Carlton Ltd on that date was:

Share capital $250,000
Retained earnings $95,000

All of the identifiable net assets of Carlton Ltd were recorded at fair value.

The following information is provided for Carlton Ltd for the year ended 30 June 2017:

Operating profit before tax 380,000
Income tax expense (114,000)
Operating profit after tax 266,000
Retained earnings at 1 July 2016 257,000
Dividends paid (100,000)
Retained earnings at 30 June 2017 423,000

Additional information:

  • The closing inventory of Richmond Ltd included goods purchased from Carlton Ltd during the year for $6,000. Their cost to Carlton Ltd was $4,000.
  • The closing inventory of Carlton Ltd included goods purchased from Richmond Ltd during the year for $12,000. Their cost to Richmond Ltd was $9,000.
  • During the year ended 30 June 2017, Carlton Ltd revalued land upwards $50,000, resulting in asset revaluation surplus of $35,000 being recognised in equity.
  • The tax rate is 30%.


i) Prepare an acquisition analysis in relation to the acquisition made by Richmond Ltd.

ii) Prepare the consolidation journal entries to account for Richmond Ltd’s investment in Carlton Ltd for the year ended 30 June 2017 in accordance with AASB 128, assuming that Richmond Ltd does prepare consolidated financial statements. Show all workings.

Click on Buy Solution and make payment. All prices shown above are in USD. Payment supported in all currencies. Price shown above includes the solution of all questions mentioned on this page. Please note that our prices are fixed (do not bargain).

After making payment, solution is available instantly.Solution is available either in Word or Excel format unless otherwise specified.

If your question is slightly different from the above question, please contact us at with your version of question.